Every few months a familiar macro story resurfaces:
Central banks are selling U.S. Treasuries and loading up on gold.
Some argue this represents a historic regime shift a slow motion exit from the dollar system and a structural bull market for gold.

It’s a great narrative.
It’s also deeply incomplete.

The reality is far messier, far less dramatic, and far more grounded in plumbing than persuasion.

In this piece, we break down what’s actually happening inside global reserves and why the “dumping Treasuries” headline misses the real drivers.

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1. Introduction Treasury Share is falling but that’s not the same as selling

Charts showing the percentage of reserves in Treasuries declining often give the impression of large-scale liquidation.

But reserve composition is driven by:

• valuation changes
• FX fluctuations
• the rise of other reserve assets
• local policy decisions
• mark-to-market losses when yields rise

When yields spiked in 2022–2023, existing Treasury holdings dropped in value.
This alone lowered their share of global reserves, even without selling a single bond.

A falling share doesn’t imply dumping.
It mostly reflects math, not a structural exit.

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2. Gold purchases are real but tiny relative to the system

Yes, central banks bought around ~900 tonnes of gold per year recently.

Sounds big.
But relative to the global reserve system?

• Gold purchases: ~$55–65B/year
• Global reserves: ~$12 trillion
• China’s reserves alone: ~$3.3 trillion
• Annual Treasury issuance: $2–3 trillion

Gold flows may influence gold prices, but they are nowhere near large enough to rewire the global financial system.

Gold is a supplement not a substitute.

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3. Treasuries are the plumbing of global trade

Many commentators treat gold and Treasuries as interchangeable safe-havens.

They aren’t.

Countries accumulate Treasuries not because they want to speculate in U.S. debt, but because:

• trade is invoiced in USD
• dollar surpluses must be parked somewhere
• Treasuries are the only deep, liquid, repo-able collateral
• they support currency stabilization
• they plug directly into the global funding system

Gold does none of these things.

Gold cannot be used for:

• repo financing
• liquidity management
• intraday settlement
• collateral chains
• short-term cash management

Central banks can hold gold for diversification, geopolitics, or signalling but they cannot run a modern reserve system on it.

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4. The marginal buyer of treasuries is no longer central banks

The biggest flaw in the “foreign selling” narrative is misunderstanding how Treasuries are priced today.

The marginal buyer is now:

• U.S. banks (liquidity regs)
• money market funds
• domestic pensions
• hedge funds doing basis trades
• the U.S. financial system itself

Foreign central banks matter, but they are no longer the dominant force setting yields.

So even if they reduce their share of Treasuries, it does not translate into a structural collapse in demand.

The system has adapted and internalized the demand engine.

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5. Geopolitics explains gold flows not a collapse of the dollar system

Gold buying is driven by:

• sanctions risk
• counterparty risk reduction
• diversification away from USD assets
• desire for non-seizable reserves

This is rational.

But it’s not a replacement of the dollar system it’s a hedge against geopolitical shocks inside the dollar system.

Countries like China, Russia, Turkey, and Middle Eastern economies are buying gold because they still operate within a USD-centric world and want insurance against political pressure.

Insurance doesn’t replace the system it insures.

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6. The 1970s analogy is convenient but misleading

Gold bulls love referencing:

• the breakdown of Bretton Woods
• the inflationary 1970s
• the “return of stagflation”

But the structural forces today are completely different:

1970s	Today
Fixed exchange rate collapse	Fully floating FX
Oil shocks + wage-price spirals	Tech deflation + flexible supply chains
Union dominance	Weak labor pricing power globally
Commodity-heavy economy	Service-driven economy

Using the 1970s to predict the 2020s is good marketing, bad macro.

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The Real Story: A Gradual Rational Re-balancing and Not a Revolution

What’s actually happening?

• Some emerging markets are reducing exposure to sanctionable assets.
• A few are adding gold as geopolitical insurance.
• Treasuries remain central because the global system requires a deep, liquid, USD-denominated store of value.
• The decline in Treasury share is mostly accounting, not mass selling.
• Gold cannot replace Treasuries in any functional reserve architecture.

The global system is evolving not collapsing.

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Why This Matters for Investors

The wrong takeaway:
“Central banks are dumping Treasuries buy gold for the next decade.”

The right takeaway:
Reserve managers are hedging geopolitical risk while continuing to rely on a dollar-centric financial system.

This creates:

• steady but limited gold support
• mild diversification away from Treasuries
• no structural threat to U.S. funding
• potential volatility in gold on geopolitical headlines
• no repeat of the 1970s regime

The narrative is dramatic.
The underlying flows are not.